Markets across Asia sold off yesterday with financial and big miners taking a whack from nervous investors.

Worries about Spain, plus the downgrading of Italy's credit rating outlook, and especially the problems in Greece, drove a lot of the selling.

Markets opened weak and fell for the rest of the day.

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Australia was down 1.9%, Japan 1.5%, South Korea around 2% (where a car industry strike hit confidence), Hong Kong more than 1.8% and China lost 2.9% where a key indicator signalled another slowing in the country's manufacturing sector.

The MSCI Asia Pacific index fell 2.2% to a two-month low. That was double the 1.1% fall last week.

Australian shares also ended at a two-month low, led down by the big banks, which came under heavy selling pressure from short sellers (according to some reports).

At the close, the benchmark ASX200 index was down 89.2 points, or 1.9 %, at 4643, the biggest drop in nine weeks.

The All Ordinaries index fell 84.8 points, or 1.8%, to 4722.9.

The Australian market has lost a nasty 6.6% in value so far this month.

All sectors were in the red, with financials down 2.2% - the biggest drop in almost one year - and materials falling 1.8% as big miners like BHP Billiton also weakened.

The fall in the share prices of the big four banks cut more than $8 billion off the value of the financials sub-index.

The main drivers were the problems in Europe, especially Greece, Spain and now Italy.

A bad election result for the German government in the small city-state of Bremen didn't help.

The ruling CDP fell to third place behind the Greens and the SDP which retained power.

Bank stocks across Asia weakened as a result.

In Australia, the NAB lost 75c or 2.7%, to $26.66, Westpac dropped 68c, or 3% to $22.07, ANZ was down 77c, or 3.4% to $22.02 and the Commonwealth Bank was 75c lower or 1.4% at $51.42.

Among other financials insurer QBE was down 38c to $17.69, AMP lost 10c to $5.172 and Macquarie Group shed 69c or 2% to $34.16.

Resources stocks were also lower, with the largest falls in the big miners. BHP Billiton was down 76 cents or 1.7% to $43.29 and Rio Tinto had dropped $1.21 or 1.5% at $78.99.

The fall so far this month has wiped out all the gains since mid-March (when the earthquake and tsunami struck northern Japan) in the Standard & Poor's GSCI Index of 24 commodities and sent the MSCI World Index of stocks down around 3%.

The Australian dollar closed close to $US1.0510, down 1% in a day and has lost around 5% in value so far in May, which should be welcomed by many companies.

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